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Russell index of small companies breaks 1,000

Investors are used to paying attention to big milestones. But this time, a big move by small companies is a large accomplishment. The Russell 2000 index, a widely-watched benchmark of small companies, Friday

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Russell index of small companies breaks 1,000

Matt Krantz, USA TODAY
3:35 p.m. EDT July 7, 2013

Specialists David Haubner and Wingszi Cihang work on the floor of the New York Stock Exchange Friday. Consumer sentiment levels were near a six-year high according to a University of Michigan poll released Friday, but the stock market got off to a slow start.(Photo: Richard Drew, AP)

Investors are used to the hoopla surrounding big market milestones. But some times, a really major move on Wall Street can happen right out in the open with little fanfare and the notice it deserves.

The Russell 2,000 index, a widely watched benchmark of small companies, Friday soared to close above the psychologically important 1,000 level for the first time. The index closed up 14.26 points to finish at 1,005.39.

The Russell breaking into new territory underscores how small-cap stocks are showing leadership and endurance in a bull market that is over four years old.

The Dow Jones industrial average, comprised of 30 blue-chip large companies, is still nearly 2% away from its all-time high. Many investors balked the past few weeks at the prospect of the Federal Reserve actually following through on its feared but inevitable pull back of massive monthly bond purchases.

After Friday's record high close for the Russell, analysts are looking to the small-cap rally as a sign that if it can hang tough, shares of large-cap companies may follow.

"Small caps are early cycle, and they tend to lead the way," says Robert Maltbie of Singular Research.

The power off the small-cap rally is catching the attention of savvy investors due to its:

* Powerful move higher. Not only did the Russell 2,000 slice through the 1,000 mark, but it made the move higher with gusto. The much-watched index is up 18.4% this year, topping the 15.5% and 14.4% year-to-date gains of the Dow and the Standard & Poor's 500 index.

* Signal about credit availability. Shares of small companies are especially sensitive to the availability of credit, so the fact they're soaring shows the financial system is functioning well, says Jack Ablin of Harris Private Bank. "When the spigots (of lending) open up, access to small names opens up," he says.

* Ability to maintain strength. The Russell's previous run at 1,000 in May faded, a victim of its own success as investors took their profits from the index's nearly 200% gain off its 2009 lows, says Todd Salamone of Schaeffer's Investment Research. But after the index faltered in late May, it's back to the lead again.

The fact that small caps not only shrugged off the pull back but are headed higher is something bullish investors were looking for as evidence the broader market may have some gas left in its tank, Ablin says. "Fueled by liquidity and momentum, small stocks could go higher," he says.